HR outsourcing

Today’s topic I would like to focus on HR outsourcing(人力资源外包).Because it is such a long article, I really do not think I wanna transfer to Chinese. Anyway. here we go. 

 

Outsourcing is the practice of contracting with vendors to perform. HR services and activities. There are three types of HR outsourcing are: discrete, multi-process,  and total process HR outsourcing .

 

Firstly, discrete outsourcing means organization only outsourcing a particular function. (e.g. Recruitment). Discrete HRO can reduce company hiring requirement for highly specialized HR professionals or HRIS expertise associated with such infrequent function, in addition, it can reduce HR administration costs associated with frequent, high volume transactions (such as payroll). Although HRO has existed for many years, it remains a popular HR administration approach for achieving strategic goal.

 

Further, HR managers may also pursue multi-process HR outsourcing. This approach involves outsourcing all of one or more related HR functions (e.g., recruitment and selection; learning& development) to niche third-party providers. It also known as comprehensive or blended services outsourcing, this approach has become more popular with the increase in the number of specialized vendors providing such services and the spread of enabling Internet portal capabilities. Such an HR administration approach can provide significant cost-reduction, while maintaining or enhancing service levels.

 

Finally, Total HR outsourcing is the third type of outsourcing approach and involves having all, or nearly all, HR functions handled by one or more external vendors. All of the traditional HR administrative and functional activities (e.g., recruitment, selection, compensation and benefits, training) would be managed through third-party vendors.

 

Advantages of HR Outsourcing

The advantages of HR administration outsourcing can be both financial and strategic. For example, organizations seeking to increase financial profitability and enhance shareowner value might reduce ongoing expenses (e.g., employees, software) and forestall capital expenditures (e.g., new buildings, equipment) through HR outsourcing. This would entail a careful “make-buy” assessment of the total costs and benefits of continuing internal operations versus contracting for them in the external market. Benefits of such an approach might include redesigned processes, improved quality, centralized or consolidated operations, access to technology, and enhanced employee satisfaction.

 

Strategic advantages to HR outsourcing might include the ability to better focus on a firm’s core business through HR transformation, moving from an historical administrative activities focus to a strategic business partner perspective. Organizations recognize that, more than ever, effective talent management may be the source of sustainable strategic advantage in a knowledge-based, global economy. However, many HR professionals are mired in day-to-day administrative tasks that preclude the value-added consulting, planning, and visioning activities required from them to achieve strategic goals. HR outsourcing could free HR professionals to focus on strategic issues (e.g., talent management, merger and acquisition due-diligence) while providing the firm with skilled professionals services in HR functional (e.g., recruitment, compensation) and administrative (e.g., government compliance and regulations) areas, powered by up-to-date technology (e.g., hardware, software).

 

Disadvantages of HR Outsourcing.

Although there are a number of financial and strategic reasons for considering HR administration outsourcing, there are also serious potential problems for firms who use the approach without fully understanding how to manage it to achieve desired goals. For example, firms who used HRO to achieve HR transformation and cost savings rated their success an average of 3 on a 5-point (1 = benefits not at all achieved and 5 = benefits fully achieved) scale. Thus, one big disadvantage of HRO is the likelihood that the organization will not achieve its strategic goals. Such a failure could have significant, negative impact on the organization’s ability to survive. Steps to minimize such a failure include realistic cost-benefit analyses, successful project planning and implementation, unambiguous goals and measures of HR outsourcing success, rigorous vendor assessment and selection processes, and skilled vendor contract negotiation, management, and auditing. Indeed, one of the primary responsibilities of HR administration managers in an outsourcing environment is to ensure that the contract terms and fulfilled on a daily basis and that corrective actions are immediately taken when failures occur.

 

Another disadvantage of HR outsourcing includes the loss of institutional expertise in the outsourced functions, making an HR outsourcing decision reversal difficult or impossible. Frequently, when outsourcing is undertaken, subject matter experts (e.g., selection) are reassigned or released. This can be a serious strategic error if the vendor is unable to fulfill its contractual obligations. As noted above, an organization would be unwise to outsource core or strategic HR planning functions because of the possibility that competitors may learn its plans from vendors. In addition, loss of internal strategic HR expertise may be devastating to an organization over time. Moreover, HR organizations may lack the contract management expertise to oversee the vendor and hold it accountable for contract terms, compounding its problems. Other potential problems include security risks in multi-vendor outsourcing, internal employee and manager resistance, compliance failures (e.g., Sarbanes-Oxley), and cultural clashes between the organization and its vendors.

 

In summary, HR outsourcing is another approach to HR administration that offers potential for cost reduction, process improvement, and employee satisfaction. However, managers of HR administrative functions must be highly skilled at using HRO strategically to achieve organizational goals.

 

 Source :Lsenhour,L.C.(2007).Human Resource Administration and HRIS.  

 

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